President's Budget Urges Action on FHA and GSE Reform Initiatives

February 5, 2008

President Bush's FY 2009 budget includes proposals to preserve and promote homeownership and respond to the troubled mortgage market. It provides $65 million for the Department of Housing and Urban Development's (HUD's) Housing Counseling program, a 30-percent increase over 2008, and $150 million to the Neighborhood Reinvestment Corporation, to help educate consumers, combat foreclosures, and promote a healthier housing market. The Budget also increases mortgage financing options for homebuyers and homeowners by modernizing HUD's Federal Housing Administration (FHA). Through risk-based pricing and other reforms, FHA will offer a wider variety of mortgage products and create more homeownership opportunities. In addition, under FHASecure, FHA is allowing families who have become delinquent on their mortgage payments as a result of their loan resets, as well as those who are current, to qualify for refinancing.

The budget once again urges Congress to enact legislation to create a new regulator for the GSE's (Fannie Mae and Freddie Mac) that would have increased authority to prevent "mission creep" by the GSE's through clarification of permissible activities and programs. This is a clarification that ALTA supports.

On the tax side, the Budget includes a proposal to expand the mortgage revenue bond program to allow refinancing of home mortgages. This proposal would allow State and local governments to use these tax-exempt bonds to refinance existing loans to assist eligible subprime borrowers. As part of the proposal, the Budget would increase the volume cap on private activity bonds, which would be dedicated or targeted to eligible subprime loan refinancing.